By Dian Hymer
Most home purchase contracts include an inspection contingency. This contingency permits the buyers to inspect the property within a certain time frame - often 10 to 14 days following contract acceptance.
Depending on how the inspection contingency is worded, the buyers may be able to withdraw from the contract without penalty if defects are discovered during the inspections. However, most buyers will attempt to negotiate a remedy with the sellers before walking away.
Let's suppose you've entered into an agreement to buy a home. Your inspections show there is dry rot in the bathroom that needs to be corrected. At the price you agreed to pay, you're not willing to pay for this work. But, you still want to buy the home. What can you do?
One option would be to simply ask the seller to do the repair work as a condition of removing your inspection contingency. One benefit of this approach is that the work is financed: the cost is included in the price of the home. Another advantage is that you don't have to be inconvenienced by living in the house while the work is in progress.
Make certain, if you take this approach, that the sellers use licensed contractors. You should make sure that all work is done with the city building permits, if any are required. Also make sure that the seller's contractors will guarantee their work for you. Do a walk-through inspection yourself before closing to make sure that all work the sellers agreed to do in the contract was, in fact, done.
There are disadvantages to having sellers do work before closing. One is that the work might not receive the caliber of supervision that you'd like. Another is that it may be an inconvenience to the sellers. In some cases, you can negotiate a better deal monetarily if you offer to do the work yourself.
First Time Tip: It may not make sense to ask the sellers to complete repair work if you have plans to remodel the area in question. For example, buyers of a home in Piedmont, Calif., discovered that the gas log-burning fireplace was not safe to use. The seller offered to fix it. The buyers refused the offer because they plan to have the fireplace rebuilt entirely to use as a wood-burning fireplace.
Let's say you were planning to remodel a bathroom that turned out to have dry rot. You might be better off negotiating the price. The money saved could be used to remodel the bathroom to your specifications. Likewise with a deck that needs repair: If you plan to change it significantly, why waste money repairing it?
There are two ways to negotiate the repair of defects so the sellers don't have to do the work. One is to lower the purchase price by an amount equivalent to the repair estimate. This approach will lower all the purchase costs that are dependent on the purchase price, like a transfer tax. It may also lower your property taxes. A disadvantage is that you'll need to come up with the cash yourself to do the repairs.
The other way is to keep the home price the same but to ask the sellers to credit you the amount of the repair estimate from their sale proceeds. This generates cash for the repairs.
The Closing: Just make sure that if you do take a credit from the sellers for repairs, you follow through and get the work done; otherwise you could be faced with more expensive repairs in the future.
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